Previewing the G.O.P.’s 2012 Argument on Tax Cuts

The White House and Congressional Republicans reached a tentative deal in which all of the Bush-era tax cuts — including those on the highest incomes — would be extended for two years. In exchange, Democrats will receive an extension of unemployment benefits, and a one-year cut in the payroll tax, which — because it is capped at $106,800 — has its largest impact on middle-income workers.

The timing of the extension ensures that tax policy will be the subject of a vigorous debate during the 2012 presidential election. President Obama, presumably, will argue as he did in 2008 that tax cuts on high incomes should be allowed to lapse. Republicans instead will suggest that they should be extended again, and probably be made permanent.

Since most polls suggest that allowing the tax cuts to expire on the wealthiest earners is a popular position, some people have argued that Mr. Obama could be on solid footing in this debate. I am not quite so sure.

Certainly I know the counter-argument that I would make if I were the Republicans. Suppose that the economy is showing relatively robust signs of recovery by 2012: not necessarily spectacular rates of growth (in which case, Mr. Obama’s re-election might be almost a sure thing), but G.D.P. growth on the order of 3 or 3.5 percent, and a reasonably significant reduction in unemployment. (Most economists do think that the deal will have some stimulative effect.)

See, this is proof that lower taxes work, I would argue if I were a Republican.

The stimulus — all that government spending — didn’t work. It just increased unemployment. But keeping taxes low worked, and the economy is finally recovering. So why on earth would we want to raise anyone’s taxes now?

There are any number of problems with this argument, not least of which is that a large portion of the 2009 fiscal stimulus itself consisted of tax cuts. And if the Republicans are not careful about making the argument, the message — essentially, let’s not change course — might read as an endorsement of divided government: Republicans in Congress, but Mr. Obama still in the White House.

Nevertheless, the argument would seem to hold at least some superficial appeal. And public opinion on taxes is fairly ambiguous. While in most recent polls, continuing all the tax cuts has been somewhat less popular than keeping them only for incomes below $250,000, few voters want the tax cuts repealed entirely, and so Mr. Obama will have to be precise about making distinctions.

Public opinion is also probably quite malleable on these issues. As recently as this summer, for instance, some polls found that extending all of the tax cuts — rather than just some of them — was the more popular position.

Finally, discussions about tax policy will inevitably be tied up in bigger-picture issues like the national debt and the proper level of governmental involvement in the economy. The Republican nominee in 2012 will almost certainly propose to repeal much or all of Mr. Obama’s health care policy, and will claim that significant savings for the taxpayer can be achieved in this way. So Mr. Obama will have to get used to formulating a more vigorous defense of his health care bill as well, an issue on which organic change in public opinion is unlikely until the bulk of its provisions go into effect in 2013.

Nate Silver is the founder and editor in chief of FiveThirtyEight. @natesilver538

Comments

Interactives

Want more FiveThirtyEight? Get our weekly most popular stories newsletter.